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Brazil: Copom’s inflation worries growing

The hawkish statement from the Brazilian central bank meeting (at which the Selic rate was raised by 75bp to 4.25%) indicates that policymakers are more confident in the economic recovery but also more worried about energy inflation than we had anticipated. With Copom now giving a clear steer that the Selic rate will return to its neutral level (rather than stay below neutral), we expect that the policy rate will be raised to 6.50% by year end (previously 5.50%).

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